Volkswagen’s Breach of Trust: Not All Failures Are Equal

In Silicon Valley a few days ago I came across the simple banner in the above photograph celebrating “The Gift of Failure.” I was reminded again, as have been so many in the great Valley wellspring of innovation, that failure is often not theopposite of success, but a preamble to it.

Juxtaposed against this celebration of failure was the Volkswagen cheating scandal, in which the company last week admitted it had installed software in 11 million diesel vehicles to fool emissions tests. VW CEO Martin Winterkorn, who was forced to resign, said he was “personally” and “deeply” sorry that he had “broken the trust of our customers and the public.” So much for the “people’s car.” The whole mess caused me to reflect on failure’s many versions, sources and implications. All failures, I’ve concluded, are not equal.

Thomas Edison famously embraced the concept that failure can be a gift. “I have not failed,” he said. “I’ve just found 10,000 ways that won’t work.” Many years later, in 2006, Stanford psychologist Carol Dweck expanded on this notion in her influential and remarkably insightful synthesis of two decades of research entitled Mindset: The New Psychology of Success. In that book, she makes the point that kids raised with a “growth mindset” – in which failure is embraced as an opportunity to learn – succeed in life more than those raised with a “fixed mindset” – in which failure is dreaded because it bares flaws.

VW’s failure to follow EPA regulations is not a failure of mere outcome – the kind that one might see in the long run as a gift, the kind that spurred Edison or, for that matter, Steve Jobs or Walt Disney or Milton Hershey. Instead, VW’s conduct revealed calculated cynicism in the service of short-term gain. No larger good could flow from VW’s creation of a “defeat device” meant only to mask toxic emissions during testing. Indeed, whatever VW earned financially from its behavior will now likely be dwarfed in fines, lost sales, and, ultimately, damage to a brand.

You might think that automakers wouldn’t keep making the same mistake. General Motors was just recently assessed a penalty of $900 million (5% of what some are estimating to be VW’s exposure) for a decade-long failure to disclose an ignition-switch defect that led to more than a hundred deaths. Before that, Toyotawas fined $1.2 billion for failing to disclose safety defects related to unintended acceleration. And of course in the 1970s there was the Ford Pinto debacle (on which Gene Hackman’s 1991 thriller, Class Action, seems to have been based).

The lesson for those of us in business and academia is to encourage the right kind of failure and avoid the wrong kind. For me, the right kind is an honest failure, in which you’re honestly striving for a worthy goal. In that endeavor, it’s better to fail fast and cheap, which in turn encourages quicker growth and learning. By contrast, the only true failure is that of character or effort. That kind of failure leads to nothing good, unless it causes a personal commitment not to fail in that way again.